Gas and diesel shortages have led to spiking costs at the pump, but they also helped Valero generate more net income in the past three months than the company made in 2024 and 2025 combined.
The San Antonio-based oil refiner made $46 billion in profits and $6.8 billion after expenses and taxes between July and September of 2026, one of its best quarters ever.
That was driven in large part by soaring income in Valero’s refining sector. A global shortage in refining capacity means Valero can make more from the oil it refines.
“The refining segment reported operating income of $8.8 billion for the third quarter of 2026, compared to $1.6 billion for the third quarter of 2025,” Chief Financial Officer Homer Bhullar told investors on an earnings call Thursday morning.
Valero also reported growth in its ethanol and renewable diesel sectors, which had $272 million and $353 million in net-income in the third quarter, respectively. In the third quarter of 2025, Valero made $183 million from its ethanol production and actually lost money, around $28 million, from its renewable diesel operations.
Conflicts between Iran and U.S. and Israel led to blockades in the Strait of Hormuz over the past year that had prevented oil and gas from leaving the Middle East, increasing prices for consumers and leaving companies like Valero with less competition.
Randy Hawkins, Valero’s vice president of crude and feedstocks supply and trading, said that oil supplies were beginning to flow out of the Strait of Hormuz in larger quantities over the last few weeks. But freight and shipping costs were keeping oil prices high, even with that increased supply.
“As the flow through the Straits increase, the inefficient process of the ship-to-ship transferring that they’re doing for crude oil in the Gulf of Oman is really tying up global shipping and requiring more tankers to move the same amount of oil,” Hawkins said. “This is in addition to you know insurance risk premiums, transshipment delays, higher bunker costs. They’re all kind of driving freight higher.”
Hawkins added that Gulf Coast refiners are positioned to weather that storm, with close access to oil produced in the United States and in Latin America. The U.S. ouster of former president Nicolás Maduro in Venezuela opened oil supplies there to U.S. companies like Valero.
Valero’s stock has skyrocketed this year, and the company has returned profits of more than $40 per share to its investors as it benefits from multiple foreign policy decisions from President Donald Trump’s administration.
Local economic experts noted the role of global conflict in Valero’s profits. Damaged refineries have created global shortages, particularly for diesel.
“The world isn’t short of oil. It’s short of the ability to make gas from crude oil,” said David Macpherson, chair of Trinity University’s Economics Department. “War has affected refining capacity elsewhere.”
Taylor Collins, an associate professor of economics at the University of the Incarnate Word, said Valero actually processed less oil than it did at the same time last year, but its revenue per barrel nearly tripled.
“Pump prices are being driven less by crude than by a shortage of refined fuel, especially diesel,” Collins said. “War-damaged Gulf refineries are still exporting less fuel than before the war, Ukrainian drone strikes have cut Russian output and the International Energy Agency estimates global diesel supply was 1.7 million barrels a day lower in the third quarter than a year earlier.”
Collins added that the U.S. Energy Information Administration projects diesel prices to remain elevated at $6 a gallon this month and at an average of $4.50 a gallon in 2027. That will maintain Valero’s strong margins, he added.
On Thursday, Valero leaders told investors that demand has remained strong for their products, despite widespread concern about gas prices. Valero’s Chief Operating Officer Gary Simmons said he was surprised that consumers hadn’t changed their demand for gas and diesel.
“In terms of a price level where you would expect some kind of demand destruction, I don’t really know where that is, because most people would have predicted we would have already seen it,” Simmons said.
Preparing for the future
The good times will not keep rolling, Macpherson said.
“There’s a real cyclicality in those margins. Just because they’re high now, doesn’t mean it will be high forever,” he said during the call.
When offline or damaged refineries in the Middle East and Russia are repaired, Valero will have more competition. Demand for oil decreases when the economy slows down or contracts, Macpherson added.
Valero is saving some of its surplus cash for changes in oil and gas commodity prices, according to Bhullar, the company’s CFO.
“When you have a rapid pullback in commodity prices, it’s generally accompanied by a draw on working capital and a draw on cash,” Bhullar said. “We wanted to make sure that we’re not constrained on our ability to return cash to shareholders.”
Bhullar added that Valero is maintaining its scheduled investments into its refinery infrastructure.
In the third quarter, Valero completed updates to its St. Charles, Louisiana, facilities on schedule. Repairs to its Port Arthur refinery are scheduled to be completed by the end of this year.
Texas and the Gulf Coast continue to be the center of the company’s refining operations. Bhullar projected Valero to produce between 1.8 million and 1.9 million barrels per day in that region, while producing no more than 500,000 barrels per day in each of its other regions.
Collins anticipated that Valero would continue investing in other Texas facilities in the near future. He also anticipated that Valero’s profits would mostly find their way to the company’s shareholders and owners, including investors like Vanguard and BlackRock.
“History suggests the windfall won’t add many local jobs: after a then-record $11.5 billion profit in 2022, Valero’s workforce held at about 9,800 through 2025, while it spent more than $9 billion buying back stock in 2022 and 2023,” Collins said.
He added that the robust profits would help job security at the company’s San Antonio headquarters.
